Published: Sat, June 23, 2018
Finance | By Loren Pratt

Kentucky lawmaker: Supreme Court internet sales tax ruling has bipartisan support

As many as 24 states and their local governments could see tax revenue gains of at least 1 percent, according to Fitch's research. The cases the court overturned said that if a business was shipping a customer's purchase to a state where the business didn't have a physical presence such as a warehouse or office, the business didn't have to collect the state's sales tax.

As a result, North Carolina has been losing more than $400 million a year in taxes, according to the N.C. Retail Merchants Association, which heralded the ruling. In his majority opinion, Justice Kennedy said it was "inconsistent" for the Supreme Court to ask Congress to "address a false constitutional premise of this Court's own creation".

Tax lawyers including Richard Jones, a tax partner at Sullivan & Worcester in Boston, said they interpreted the decision as meaning sales tax could be applied retroactively - perhaps on sales as far back as 10 years.

This has been a point of contention between states and online retailers for a long time. "South Dakota has a uniquely simple law since it generally taxes all consumer purchases instead of carving out a bunch of exceptions, and online sellers can remit their taxes to the state instead of each and every locality".

That said, you probably won't pay more for the artisanal products offered by small retailers on Etsy or eBay. eBay, a home to thousands of small sellers, framed the ruling "limited to large online retailers" in a statement to CNNMoney.

Gov. Mary Fallin applauded the decision but in its wake still urged the U.S. Congress to "level the field" for small businesses by "implementing a fair system for online sales tax" for retailers in Oklahoma and across the nation.

The online stores have contended that charging sales tax would be "burdensome" for small- to mid-sized shops. If consumers don't claim those taxes when filing their returns, that is revenue the state doesn't receive.

There are now significant complexities in the thousands of state and local sales tax laws, including different minimum thresholds, tax holidays, and product tax category rules.

For those who tend to patronize the biggest retailers, the ruling may not make much of a difference.

In South Dakota, which brought the lawsuit to the Supreme Court, legislators approved their sales tax in 2016 and devoted its proceeds toward teacher salaries.

In the new case, South Dakota v. Wayfair, South Dakota had attempted to overturn that precedent, arguing that Quill was decided before the existence of internet commerce. Roberts wrote that Congress, not the court, should change the rules if necessary.

Chief Justice John Roberts dissented, along with Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan, saying USA lawmakers should take up the issue.

In making the 5-4 decision, the court acknowledged but largely tossed out the internet companies' arguments.

And the state would likely see a $20 million per year revenue boost by levying such a tax, according to a Legislative Finance Committee analysis. But in a concurrence, Kennedy acknowledged the "startling revenue shortfall" suffered by the states because of the court's Quill decision and invited them to try to find a better case in which to present the issue to the high court.

"This ruling clears the way (for) all retailers to compete under the same sales tax rules whether they sell merchandise online, in-store or both", said National Retail Federation president and CEO Matthew Shay.

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